State governments are facing a “big squeeze” from local governments and the federal government, according to a fiscal survey released Tuesday by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO).
That squeeze, the survey suggested, will happen as states get less federal funds due to anticipated cuts while local governments attempt to look for state help to deal with declining local property values.
“This report shows that state budgets are certainly improving, however, growth is weak and there is not enough money for all of the bills coming in,” NASBO Executive Director Scott Pattison said in a conference call with reporters. “State officials will still be cutting some programs, and increases in funding for any program except for health care will be rare.”
Pattison said growth in states’ budgets hasn’t come back to pre-recession levels.
“But 19 states had to cut their budgets mid-year last year and that’s way down from 39 states having to cut mid-year in the previous fiscal year,” Pattison pointed out.
Overall, states’ budgets included nearly $667 billion in general fund expenditures this year, a 2.9 percent increase compared to $648 billion in general fund spending last year. But that’s still $20 billion less than the pre-recession high of $687 billion in 2008, according to the survey.
Pattison described revenue forecasts as “relatively lackluster” with flat corporate and sales tax receipts, but noted there was a slight increase in personal income tax collections.
“The survey mirrors what we see economically,” Pattison added. “It’s not enough growth to overcome the loss of (federal stimulus) funds (which expired this year.) ... States went from receiving $50 billion in Medicaid and flexible education funds from the (stimulus) to under $3 billion this year. ... That means any new dollars are going to Medicaid.”
NGA Executive Director Dan Crippen said state governments also will be pressured by local governments impacted by the decline in housing values.
“As property values drop, property tax revenues drop and it takes assessments a while to catch up,” Crippen told reporters. “Local government is looking to the states to help them out during their time of recession. There’s a lot of pressure on education and transportation funding. ... We expect funding reductions in homeland security, and states are still not getting revenue from Internet sales. ... It’s not a great outlook.”
Elected officials in Tennessee and Virginia continue to make moves to deal with the budget pain.
Tennessee lawmakers passed a budget this year that included about $1.8 billion less in federal funds, and Gov. Bill Haslam has been holding department budget hearings looking for further cuts in the next fiscal year.
On Tuesday, Virginia Gov. Bob McDonnell unveiled a government reorganization plan that called for eliminating two state agencies, merging seven state agencies into others, eliminating 19 boards and commissions, merging 23 boards and commissions to form 11 boards and commissions, moving four offices and initiatives and deregulating three professions. McDonnell said his plan, to be considered in the 2012 legislative session, would save at least $2 million per year.
For more about the NGA-NASBO fiscal survey go to www.nga.org.